Oil tops $112 on strength in China, U.S. data

Oil rose above $112 per barrel on Monday on signs that economic growth is picking up in China, the world's second-biggest oil consumer, and on positive data from the U.S. manufacturing sector.

The latest readings from official and private sector surveys of China's vast manufacturing sector showed activity picked up November, adding to evidence the economy is reviving after seven quarters of slowing growth.

"Crude oil prices are beginning the new week of trading up thanks to positive economic data from China," said Carsten Fritsch of Commerzbank. "The geopolitical tensions in the Middle East are also playing their part."

Brent futures were up 92 cents at $112.15 per barrel by 1428 GMT, after rising 2.3 percent in November. U.S. crude rose $1.31 to $90.22 per barrel.

Lending further support to oil prices, Markit's U.S. Purchasing Managers Index for the manufacturing sector rose to 52.8 in November, marking further gains in expansion territory.

Turmoil in the Middle East also supported oil. Egypt's top court shut down over Islamist protests and Syrian forces pounded rebel-held suburbs around Damascus with fighter jets on Sunday.

"The on-going Syrian tension, the tentative Israel-Hamas ceasefire … and the rift over the new Egyptian constitution … it is not hard to see why geopolitics are supportive," Tamas Varga, an oil analyst at brokers PVM Oil Associates in London, said in a research note.

The HSBC Purchasing Managers Survey (PMI), which focuses on China's private export-oriented manufacturers, rose to 50.5 in November, inching above the 50-mark that separates growth from contraction for the first time in 13 months.

Investors will now be awaiting China's industrial output and trade data later this month for further confirmation of steady growth revival in the world's biggest energy consumer.

Concern over the United States' fiscal deficit and talks on the upcoming fiscal cliff, a $600 billion package of tax hikes and spending cuts which may plunge the world's biggest economy into deep recession, kept oil price gains in check.

"It's the main downside risk for prices as it could increase risk-aversion, push up the U.S. dollar and therefore weigh on commodities prices and also on oil prices," Fritsch said.

The package takes effect at the end of the year and President Barack Obama's administration and congressional leaders are trying to work toward a deficit reduction.